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Wednesday, May 29, 2013

UK Courts Challenge the Premise That Winning Virtual Currency In Social Games Is Not Gambling

Facebook and casual online game properties that offer casino style games of chance have used the no cash out for “real” money argument to protect these properties from adhering to traditional gambling laws.

A recent case argued in UK courts involving stolen virtual currency used in Zynga poker and then sold to a third party for real cash forced the judge in the case to further explore the notion that virtual currency has no “real” value if it is not exchanged for traditional currency. The court concluded, that the action taken by the seller and buyer in the case, combined with the common practice of using virtual currency to buy virtual good’s in many online gaming sites, does imply that the participants in these games do ascribe a real “value” to virtual currency and goods even if there is no “cash-out”.

Marcus Charif, from the London law firm Harris and Hagan, has dissected this ruling in a recent publication entitled “Show Me The Money; Social Games, Virtual Currency and Gambling”. Although it is obvious to people that play gambling style games in Facebook or on casual games sites using purchased virtual currency there is a real gambling element involved in game play, businesses have dodged the “gambling” label sighting the no traditional currency cash out rule.

I can not say that I blame the businesses for this practice. If that is what the law states then let the games begin. However, with mounting evidence that virtual currency transactions within games are beginning to eclipse traditional online gambling revenues you have to believe that the establishment of “value” in the virtual world is there even without a cash out to dollars of euros.

This salient yet obvious point was driven home at the GDC conference this year when one of the speakers at the conference indicated that high rollers were contributing $50,000 to $100,000 a year to virtual currency fueled social games. Certainly not all of these whales were buying this currency in casino style games. However, the behavior does make it clear that virtual currency and virtual currency have “value”.

It is difficult to say how bold and brave the courts will be in taking on the virtual world value issue. Ironically, the online gambling business community may be the ones that call the courts bluff based on the industries loss of players and revenue to the virtual world. If I was running a legal online gambling operation in Europe and dealing with all of the tax issues, government harassment and anti-competitive restrictions associated with online gambling I would call into question what is happening in the virtual world. Certainly if online gambling becomes legal in the US the big guys are going to resent what is happening in Facebook and want it stopped.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.